2Q 2015 Conference Call Presentation

American International Group, Inc.
Conference Call Presentation
Second Quarter 2015
August 4, 2015
Cautionary Statement Regarding
Forward Looking Information
This document and the remarks made within this presentation may include, and officers and representatives of American International
Group, Inc. (AIG) may from time to time make, projections, goals, assumptions and statements that may constitute “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These projections, goals, assumptions and
statements are not historical facts but instead represent only AIG’s belief regarding future events, many of which, by their nature, are
inherently uncertain and outside AIG’s control. These projections, goals, assumptions and statements include statements preceded by,
followed by or including words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “view,” “target” or “estimate.” It is possible that AIG’s
actual results and financial condition will differ, possibly materially, from the results and financial condition indicated in these projections,
goals, assumptions and statements. Factors that could cause AIG’s actual results to differ, possibly materially, from those in the specific
projections, goals, assumptions and statements include: changes in market conditions; the occurrence of catastrophic events, both natural
and man-made; significant legal proceedings; the timing and applicable requirements of any new regulatory framework to which AIG is
subject as a nonbank systemically important financial institution and as a global systemically important insurer; concentrations in AIG’s
investment portfolios; actions by credit rating agencies; judgments concerning casualty insurance underwriting and insurance liabilities;
judgments concerning the recognition of deferred tax assets; and such other factors discussed in Part I, Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations (MD&A) in AIG’s Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2015, Part I, Item 2. MD&A in AIG’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2015 and
Part I, Item 1A. Risk Factors and Part II, Item 7. MD&A in AIG’s Annual Report on Form 10-K for the year ended December 31, 2014.
AIG is not under any obligation (and expressly disclaims any obligation) to update or alter any projections, goals, assumptions or other
statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise.
This document and the remarks made orally may also contain certain non-GAAP financial measures. The reconciliation of such measures
to the most comparable GAAP measures in accordance with Regulation G is included in the Second Quarter 2015 Financial Supplement
available in the Investor Information section of AIG's corporate website, www.aig.com, as well as in the Appendix to this presentation.
2
Second Quarter 2015 Highlights
Stable Underwriting and Accelerating Capital Management
After-tax operating income of $1.9B ($1.39 per share)
– Improvement in accident year combined ratio, as adjusted, for Property Casualty & Mortgage Insurance YoY
Operating
Highlights
– Continued base investment income pressure on Life & Retirement operating segments
– Book value per share, ex. AOCI and DTA, of $62.22 grew 7% from year-end 2014 and 10% YoY
– Normalized ROE, ex. AOCI and DTA, of 7.3% in 1H15
YTD total share repurchases of $4.7B through end of July 2015
– Repurchased approximately $2.3B of shares in 2Q15 (additional $965mm repurchased through the end of
Active Capital
Management
July 2015)
– Additional share repurchase authorization of $5.0B on August 3, 2015; ($6.3B total available under the
authorizations at August 3, 2015)
– 124% increase in quarterly dividend to $0.28/sh.
Parent liquidity of $13.6B at June 30, 2015
Balance Sheet &
Liquidity
– Parent liquidity reflects cash proceeds of $4.6B from non-core asset monetizations in 2Q15
– Distributions from insurance subsidiaries to AIG Parent of $2.1B in 2Q15
3
AIG Consolidated Operating Financial Highlights
($ in Millions, Except per Share Amounts)
2Q14
2Q15
$15,419
$15,635
1%
1,245
1,192
(4%)
Mortgage Guaranty
210
157
(25%)
Institutional Markets
170
151
(11%)
1,625
1,500
(8%)
Retirement
764
804
5%
Life
215
149
(31%)
Personal Insurance
140
70
(50%)
1,119
1,023
(9%)
2,744
2,523
(8%)
(51)
345
N/M
Total Pre-tax operating income
$2,693
$2,868
6%
After-tax operating income attributable to AIG
$1,796
$1,893
5%
$1.23
$1.39
13%
9.1%
9.3%
Book value per common share
$75.71
$79.74
5%
Book value per common share – ex. AOCI & DTA
$56.53
$62.22
10%
Operating revenues
Inc. / Dec.
Pre-tax operating income (loss):
Commercial Insurance:
Property Casualty
Total Commercial Insurance
Consumer Insurance:
Total Consumer Insurance
Total Insurance Operations
Corporate and Other1
After-tax operating income attributable to AIG per common share
Return On Equity:
ROE – After-tax operating income – ex. AOCI & DTA
Book Value Per Common Share:
1)Includes consolidations and eliminations.
4
Corporate and Other Operations
($ in Millions)
2Q14
2Q15
Pre-tax operating income (loss):
Corporate and Other Operations:
Equity in pre-tax operating earnings of AerCap
Fair value of PICC investments
$53
$127
-
170
17
509
(306)
(268)
(327)
(278)
Direct Investment book1
313
-
Global Capital Markets1
245
-
Runoff insurance lines
(53)
110
7
(25)
($51)
$345
Income from other assets,
net1
Corporate general operating expenses
Interest expense
Consolidation, elimination, and other adjustments
Total Corporate and Other
1) As a result of the progress of the wind down and de-risking activities of the Direct Investment book (DIB) and the derivative portfolio of AIG Financial
Products Corp. and related subsidiaries included within Global Capital Markets (GCM), AIG has discontinued separate reporting of the DIB and GCM.
Their results are reported within Income from other assets, net, beginning with the first quarter of 2015. This reporting aligns with the manner in which AIG
manages its financial resources. Prior periods are presented in the historical format for informational purposes. AIG borrowings supported by assets
continue to be managed as such with assets allocated to support the timely repayment of those liabilities. Assets previously held in the DIB and GCM that
are otherwise not required to meet the obligations and capital requirements of the DIB and GCM have been made available to AIG Parent. In conjunction
with the change made to DIB/GCM, management also made the following presentation changes within the Corporate and Other segment to better align
with how management reviews the Corporate operations. The results of “Other businesses, net” and investments held by AIG Parent, net of intercompany
eliminations are now also shown as part of “Income from other assets, net.” Prior periods have been revised to conform to the current period presentation.
5
Progress on Financial Targets
($ in Millions, Except per Share Amounts)
Progress on Financial Targets
Annual Targets
Through 2017
10+% Growth in
Book Value
Per Share, ex.
AOCI and DTA
2015
Target
$64.05
YTD
June 30,
2015
$62.22
~50+ bps Increase
in Normalized ROE,
ex. AOCI and DTA
7.9%
7.3%
3–5%
Reduction in
Net Expenses1
$350 - $600
↓$205
from 1H14
Commentary
 Growth of 7% since year-end 2014 was
driven by net earnings and accretion from
share repurchases.
 Second half Property Casualty underwriting
performance and expense management are
integral levers towards achieving target.
Timing of AerCap sale a headwind for full
year 2015 normalized ROE.
 Net expenses declined 3.5% from 1H14.
1) General operating expenses, operating basis (see non-GAAP measures in appendix).
6
General Operating Expenses
Targeting 3-5% of Annual Reduction Through 2017
General Operating Expenses, Operating Basis ($ in Millions)
$5,931
$53
$825
$744
$3,052
$2,879
$407
$376
$25
$418
$368
$28
$3,016
$2,993
$408
$355
$24
$434
$365
$11
$20
$428
$378
$2,071
$2,238
$2,206
$2,206
$1,972
$2,117
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
General operating expenses
Other acquisition expenses
$39
$851
$747
$2,942
$2,784
$423
$369
$5,726
Loss adjustment expenses
$19
$4,309
$4,089
1H14
1H15
Investment and other expenses
 General operating expenses, operating basis, declined 3.6% in 2Q15 and 3.5% in 1H15, compared to the
corresponding periods in 2014.
 We manage our expenses on a gross basis – before allocation to loss adjustment expenses, other acquisition
expenses and investment and other expenses – as it provides a more meaningful indication of our fixed operating
costs.
Note: General operating expenses, operating basis (see non-GAAP measures in appendix).
7
Strong Capital Position
($ in Billions, Except per Share Amounts)
Capital Structure
Financial Debt 1
Total Equity
$126.4
$16.6
Book Value Per Share
Hybrids
$125.1
$2.5
$18.8
$1.6
BVPS, ex. AOCI & DTA
$90.00
$77.69
+3%
$104.6
Dec. 31, 2014
June 30, 2015
Hybrids / Total capital
1.9%
1.3%
Pro Forma
June 30
20152
1.1%
Financial debt / Total capital
13.2%
15.0%
14.9%
Total debt / Total capital
15.1%
16.3%
16.0%
Dec. 31 June 30
2014
2015
Ratios:
DTA
$79.74
$11.69
$11.75
$107.3
AOCI
$5.83
$60.00
$7.71
$30.00
$58.23
$62.22
Dec. 31, 2014
June 30, 2015
+7%
$0.00
Liability Management Activity:
 In April 2015, repurchased in cash tender offers approximately $937mm aggregate principal amount of AIG Parent debt. In July 2015,
repurchased in cash tender offers approximately $3.4B aggregate principal amount of AIG Parent debt.
 In July 2015, issued $1.25B aggregate principal amount of 3.750% Notes due 2025, $500mm aggregate principal amount of 4.700% Notes due
2035 and $750mm aggregate principal amount of 4.800% Notes due 2045. In addition, in July 2015, issued $290mm aggregate principal
amount of 4.90% Callable Notes due 2045.
1) Includes AIG notes, bonds, loans and mortgages payable, and AIG Life Holdings, Inc. (AIGLH) notes and bonds payable, and junior subordinated debt.
2) Adjusted to reflect July 2015 repurchase and issuance activity noted above.
8
Parent Liquidity – A Source of Strength
Changes in Parent Liquidity ($ in Billions)
$0.9
$2.5
$3.7
$11.3
$13.6
$1.3
$0.3
$2.1
$0.3
Unencumbered
Securities
Unencumbered
Securities
$5.9
$4.9
Cash &
S/T Inv.
Cash &
S/T Inv.
$7.7
$6.3
Balance at
3/31/15 1
Insurance
Company
Distributions 3
Sale of
AerCap
Shares
Sale of
PICC/LEAF
Shares
Share
Repurchases &
Dividends
Debt tender
Interest Paid
Other, net
Balance at
6/30/15
Insurance Company Distributions ($ in Millions)
$5,673
$3,545
$2,851
$291
$2,097
$314
$1,737
$1,653
$510
$886
$701
$800
$1,117
1Q14
2Q14
3Q14
4Q14
$1,924
$271
Non-Life Insurance Companies
$3,528
$2,485
$2,437
$(57)
$4,021
2
$781
$2,145
$3,361
3
$2,539
$800
$720
$924
$501
1Q15
2Q15
1H'14
Life Insurance Companies
$1,011
$701
$1,301
1H'15
Tax Sharing Payments, Net
1) Parent liquidity at 3/31/2015 was revised to include liquidity associated with the DIB and GCM. See Note 1 on page 5 for additional information.
2) 1Q15 includes $2.8B of dividends that were declared in 4Q14.
3) Excludes other non-cash dividends of $299mm from Non-Life Insurance Companies, which are not reported in Parent liquidity.
9
Commercial Insurance
10
Commercial Insurance –
Property Casualty Financial Highlights
($ in Millions)
2Q14
2Q15
Net premiums written
$5,813
$5,583
Net premiums earned
5,269
5,102
183
61
1,062
1,131
$1,245
$1,192
Underwriting income
Net investment income
Pre-tax operating income
 NPW, excluding the effects of FX, increased modestly YoY (down 4.0% on a
reported basis) reflecting growth in Financial lines and Specialty, offset by
continued pricing discipline in the E&S property market and optimization of
the Casualty portfolio in the U.S.
 Overall rates declined slightly YoY, excluding U.S. Property, which declined
5.3%. Continued rate improvement was seen in U.S. Specialty at +1.6% and
U.S. Financial lines at +0.4%.
 The accident year loss ratio, as adjusted, increased slightly YoY driven by
higher severe losses in Specialty and increased losses in Commercial Auto
Liability, partially offset by improved loss experience in Property.
 The accident year combined ratio, as adjusted, improved 0.7 points YoY
largely driven by a reduction in GOE.
Net Premiums Written
($ in Millions)
Combined Ratios
Constant $
Growth Rate
$7,000
$6,000
$5,813
$5,000
$1,176
$4,000
$898
$3,000
$1,732
$1,628  2.1%
$2,007
$1,812  6.4%
$2,000
$1,000
$5,583
 0.3%
$1,225
10.0%
$918
 7.3%
$-
120
100
80
96.5
13.4
15.4
98.8
12.9
15.1
95.3
13.4
15.4
94.6
12.9
15.1
67.7
70.8
66.5
66.6
3.7
3.6
3.7
3.6
2Q14
2Q15
2Q14
2Q15
60
40
20
2Q14
Casualty
Accident Year,
as Adjusted
Calendar Year
Property
2Q15
Specialty
Financial lines
0
Loss Ratio
Acquisition Ratio
GOE Ratio
Severe Loss Ratio
11
Commercial Insurance –
Mortgage Guaranty Financial Highlights
($ in Millions)
2Q14
2Q15
$11,057
$15,190
Net premiums written
249
277
Net premiums earned
226
226
Underwriting income
177
122
33
35
$210
$157
New insurance
written1
Net investment income
Pre-tax operating income
 New insurance written grew $4.1B YoY, primarily from
refinance activity as a result of a reduction in mortgage interest
rates and improvements in existing home sales.
 Pre-tax operating income decreased YoY due to a decline in
favorable PYD in first-lien business to $17mm in 2Q15 versus
$89mm in 2Q14.
 Excluding the effects of PYD, pre-tax operating income
increased $19mm, or 16%, YoY due primarily to a decline in
accident year losses from lower delinquency rates and higher
cure rates.
Primary Delinquency Trend1
Combined Ratios
Calendar Year
70
60
50
40
30
20
10
0
-10
Accident Year,
as Adjusted
41
4.8%
4.6%
40
21.7
46.0
16.4
17.7
8.4
8.8
53.5
3.0%
34
8.8
2Q15
Loss Ratio
Acquisition Ratio
2Q14
2Q15
GOE Ratio
1) Domestic First-lien only, based on the principal amount of loans insured.
2.5%
2.0%
2Q14
3Q14
4Q14
DQ Count (in thousands)
-3.1
2Q14
33
31
27.0
19.5
8.4
4.0%
3.5%
17.7
36.3
16.4
3.6%
38
36
4.5%
3.9%
39
61.1
5.0%
4.4%
1Q15
2Q15
DQ Ratio
 Delinquencies continue to decrease as volume of
new delinquencies declines and cure rates improve.
12
Commercial Insurance –
Institutional Markets Financial Highlights
($ in Millions)
Premiums and deposits
2Q14
2Q15
$195
$680
Premiums
161
643
Policy fees
45
50
Reserves & Stable Value Wrap AUM
$80,000
$60,000
$40,000
Net investment income
501
479
Total operating revenues
707
1,172
Benefits and expenses
537
1,021
$170
$151
Pre-tax operating income
$20,000
$68,420
$59,554
$26,108
$32,588
$33,446
$35,832
June 30, 2014
June 30, 2015
$0
Total Reserves
SVW – AUM
 The increase in premiums and benefits and expenses is
due to a large terminal funding annuity issued in 2Q15.
 The decline in pre-tax operating income from 2Q14 reflects
lower yield enhancements from bond call/tender income,
partially offset by higher returns on alternative investments.
 The increase in reserves and stable value wrap AUM from
2Q14 reflects growth in new business and contracts
transferred from Global Capital Markets.
13
Consumer Insurance
14
Consumer Insurance – Retirement Financial Highlights
2Q14
2Q15
$6,167
$6,070
Premiums
97
44
Policy fees
248
277
1,563
1,618
502
526
Total operating revenues
2,410
2,465
Benefits and expenses
1,646
1,661
Pre-tax operating income
$764
$804
($ in Millions)
1
Premiums and deposits
Net investment income
Advisory fee and other income
Assets Under Management
June 30, 2015 – $224.9 Billion
Retirement
Income
Solutions
23%
Group
Retirement
42%
 Premiums and deposits declined 2%, due to declines in Fixed
Annuities, which continue to be affected by the low interest
rate environment, and lower deposits in Group Retirement.
These declines were partially offset by an increase in Retail
Mutual Funds and an increase in Retirement Income Solutions
driven by strong sales of index annuities.
 Policy fees and advisory fee income increased as a result of
positive net flows and favorable separate account
performance.
 Net investment income increased as a result of strong
alternative investment performance, partially offset by lower
base portfolio income from lower reinvestment rates and lower
average assets resulting from dividend payments to AIG
Parent.
Retail
Mutual Funds
6%
Fixed
Annuities
29%
 Retirement assets under management of $225B at June 30,
2015 decreased $2B from June 30, 2014. Strong net flows in
Retirement Income Solutions and separate account
investment performance were offset by net outflows in Fixed
Annuities and Group Retirement and the decrease in fair value
of fixed maturity assets due to the increase in interest rates in
2Q15.
1) Excludes activity related to closed blocks of fixed and variable annuities.
15
Consumer Insurance –
Retirement – Base Yields and Spreads
Base Yields1
5.35%
5.11%
5.15%
5.08%
5.06%
5.03%
4.99%
4.92%
3Q14
4.96%
4.92%
1Q15
4.98%
4.95%
5.00%
4.75%
2Q14
4Q14
2Q15
Cost of Funds2
3.50%
3.03%
2.99%
2.98%
2.97%
2.94%
2.83%
2.81%
2.80%
2.78%
2.77%
2Q14
3Q14
4Q14
1Q15
2Q15
2.21%
3.00%
2.50%
2.00%
Base Net Investment Spreads1
3.00%
2.50%
2.00%
1.50%
1.00%
2.28%
2.25%
2.23%
2.21%
1.97%
1.93%
1.98%
1.95%
2Q14
3Q14
4Q14
Fixed Annuities
1Q15
2.14%
2Q15
Group Retirement
 Trend in base yields reflects the reinvestment of cash flows at yields lower than the overall portfolio rate. The increase in Group Retirement
base yield and net investment spread in 2Q15 was due to additional accretion income, which added 14 bps.
 Management remains focused on actions to reduce the cost of funds in order to support base spreads. In the second quarter, cost of funds
continued to benefit from active management of crediting rates, disciplined new business pricing and the run-off of older business with
crediting rates generally higher than the overall cost of funds.
1) Annualized return on base portfolio.
2) Excludes the amortization of sales inducement assets.
16
Consumer Insurance – Life Financial Highlights
($ in Millions)
2Q14
2Q15
Premiums and deposits
$1,207
$1,249
Premiums
676
702
Policy fees
353
362
531
551
-
17
Total operating revenues
1,560
1,632
Benefits and expenses
1,345
1,483
Pre-tax operating income
$215
$149
Net investment income
1
Other income
 Excluding the effect of FX, Life premiums and deposits
increased 6% YoY (3% on a reported basis) primarily due to
growth in Japan and the acquisition of AIG Life Limited.
 Net investment income reflected higher returns on alternative
investments.
 The decline in pre-tax operating income primarily reflected
mortality experience, which was within pricing expectations but
less favorable than 2Q14.
 General operating expenses increased compared to 2Q14,
primarily due to international growth, including acquisitions.
2Q15 New Business Sales
$110 Million
Health
U.K.
12%
Other
8%
Term Life
44%
Universal
Life
24%
 Life insurance new product sales continue to reflect the
balance and diversification of new business from a geographic
and product portfolio perspective.
14%
Japan
U.S.
 New business sales in the U.S. are from universal and term
life. Japan sales consist of whole life, health and savings
products. U.K. sales are primarily term life.
56%
 Life insurance in force increased 10% from a year ago,
primarily due to the acquisition of AIG Life Limited.
30%
Whole
Life
12%
1) Other income primarily related to commission and profit sharing revenues received by Laya Healthcare from the distribution of insurance
products.
17
Consumer Insurance –
Personal Insurance Financial Highlights
($ in Millions)
2Q14
2Q15
Net premiums written
$3,177
$2,930
Net premiums earned
3,026
2,806
37
7
103
63
$140
$70
Underwriting income
Net investment income
Pre-tax operating income
 Personal Insurance NPW, excluding the effects of FX, increased 2% (down
8% on a reported basis) driven by growth in the Auto and Property
businesses, partially offset by declines in U.S. warranty service programs.
 The decrease in underwriting income reflected increased accident year loss
ratios in Auto and Property, partially offset by improvements in A&H in both
the loss ratio and acquisition ratio.
 The accident year loss ratio, as adjusted, decreased primarily due to
improved performance in a warranty retail program, which was partially offset
by an increase in the acquisition ratio due to a related profit sharing
arrangement. Excluding the warranty retail program, the loss ratio increased
due to the higher Auto and Property losses.
 The decline in net investment income reflected lower investment yields and
lower allocated investment income.
Net Premiums Written
($ in Millions)
$3,500
Constant $
Growth Rate
$3,177
$3,000
$2,500
Combined Ratios
$1,384
$2,000
$2,930
2.0%
$1,238
0.8%
$1,000
120
100
80
$1,500
60
$1,793
$1,692
4.1%
$500
2Q14
Personal Lines
2Q15
Accident and Health
98.8
99.7
98.7
99.8
18.4
19.1
18.4
19.1
26.9
27.9
26.9
27.9
53.5
52.7
53.4
52.8
2Q14
2Q15
2Q14
2Q15
40
20
$-
Accident Year,
as Adjusted
Calendar Year
0
Loss Ratio
Acquisition Ratio
GOE Ratio
18
Q&A
19
Appendix – Non-GAAP Reconciliations
20
Glossary of Non-GAAP Financial Measures
AIG
We use the following operating performance measures because we believe they enhance the understanding of the underlying profitability of
continuing operations and trends of our business segments. We believe they also allow for more meaningful comparisons with our insurance
competitors. When we use these measures, reconciliations to the most comparable GAAP measure are provided, on a consolidated basis.
 Operating revenue excludes Net realized capital gains (losses), Aircraft leasing revenues, income from legal settlements (included in Other income for GAAP
purposes) and changes in fair values of fixed maturity securities designated to hedge living benefit liabilities, net of interest expense (included in Net
investment income for GAAP purposes).
 Book Value Per Share Excluding Accumulated Other Comprehensive Income (AOCI) and Book Value Per Share Excluding AOCI and Deferred Tax
Assets (DTA) are used to show the amount of our net worth on a per-share basis. We believe these measures are useful to investors because they eliminate
the effect of non-cash items that can fluctuate significantly from period to period, including changes in fair value of our available for sale securities portfolio,
foreign currency translation adjustments and U.S. tax attribute deferred tax assets. Deferred tax assets represent U.S. tax attributes related to net operating
loss carryforwards and foreign tax credits. Amounts are estimates based on projections of full year attribute utilization. Book Value Per Share Excluding AOCI
is derived by dividing Total AIG shareholders’ equity, excluding AOCI, by Total common shares outstanding. Book Value Per Share Excluding AOCI and DTA
is derived by dividing Total AIG shareholders’ equity, excluding AOCI and DTA, by Total common shares outstanding.
 After-tax operating income attributable to AIG is derived by excluding the following items from net income attributable to AIG:
– deferred income tax valuation allowance releases and charges;
– income and loss from divested businesses, including:
– changes in fair value of fixed maturity securities designated to hedge
• gain on the sale of International Lease Finance Corporation
(ILFC); and
living benefit liabilities (net of interest expense);
• certain post-acquisition transaction expenses incurred by AerCap
– changes in benefit reserves and deferred policy acquisition costs (DAC),
Holdings N.V. (AerCap) in connection with its acquisition of ILFC
value of business acquired (VOBA), and sales inducement assets (SIA)
and the difference between expensing AerCap’s maintenance
related to net realized capital gains and losses;
rights assets over the remaining lease term as compared to the
– other income and expense — net, related to Corporate and Other run-off
remaining economic life of the related aircraft and related tax
effects;
insurance lines; loss on extinguishment of debt;
– legacy tax adjustments primarily related to certain changes in
– net realized capital gains and losses;
uncertain tax positions and other tax adjustments; and
– non-qualifying derivative hedging activities, excluding net realized capital
–
legal reserves and settlements related to legacy crisis matters, which
gains and losses;
include favorable and unfavorable settlements related to events
– income or loss from discontinued operations;
leading up to and resulting from our September 2008 liquidity crisis
and legal fees incurred as the plaintiff in connection with such legal
matters.
 Return on Equity – After-tax Operating Income Excluding AOCI and Return on Equity – After-tax Operating Income Excluding AOCI and DTA are
used to show the rate of return on shareholders’ equity. We believe these measures are useful to investors because they eliminate the effect of non-cash
items that can fluctuate significantly from period to period, including changes in fair value of our available for sale securities portfolio, foreign currency
translation adjustments and U.S. tax attribute deferred tax assets. Deferred tax assets represent U.S. tax attributes related to net operating loss carryforwards
and foreign tax credits. Amounts are estimates based on projections of full year attribute utilization. Return on Equity – After-tax Operating Income Excluding
AOCI is derived by dividing actual or annualized after-tax operating income attributable to AIG by average AIG shareholders’ equity, excluding average AOCI.
Return on Equity – After-tax Operating Income Excluding AOCI and DTA is derived by dividing actual or annualized after-tax operating income attributable to
AIG, by average AIG shareholders’ equity, excluding average AOCI and DTA.
21
Glossary of Non-GAAP Financial Measures (continued)
AIG
 Normalized Return on Equity, Excluding AOCI and DTA further adjusts Return on Equity – After-tax Operating Income, excluding AOCI and
DTA for the effects of certain volatile or market related items. Normalized Return on Equity, Excluding AOCI and DTA is derived by excluding
the following tax adjusted effects from Return on Equity – After-tax Operating Income, Excluding AOCI and DTA:
– Catastrophe losses compared to expectations
– Alternative investment returns compared to expectations
– DIB/GCM returns compared to expectations
– Fair value changes on PICC investments
– DAC unlockings
– Net reserve discount change
– Life insurance IBNR death claim charge
– Prior year loss reserve development
 General operating expenses, operating basis, is derived by making the following adjustments to general operating and other expenses:
include (i) loss adjustment expenses, reported as policyholder benefits and losses incurred and (ii) certain investment and other expenses
reported as net investment income, and exclude (i) advisory fee expenses, (ii) non-deferrable insurance commissions, (iii) direct marketing and
acquisition expenses, net of deferrals, (iv) legal reserves related to legacy crisis matters and (v) other expense related to a retroactive
reinsurance agreement. We use general operating expenses, operating basis, because we believe it provides a more meaningful indication of
our ordinary course of business operating costs.
Commercial Insurance: Property Casualty and Mortgage Guaranty; Consumer Insurance: Personal Insurance
 Pre-tax operating income: includes both underwriting income and loss and net investment income, but excludes net realized capital gains and
losses, other income and expense — net and legal settlements related to legacy crisis matters described above. Underwriting income and loss
is derived by reducing net premiums earned by losses and loss adjustment expenses incurred, acquisition expenses and general operating
expenses.
 Ratios: We, along with most property and casualty insurance companies, use the loss ratio, the expense ratio and the combined ratio as
measures of underwriting performance. These ratios are relative measurements that describe, for every $100 of net premiums earned, the
amount of losses and loss adjustment expenses, and the amount of other underwriting expenses that would be incurred. A combined ratio of
less than 100 indicates underwriting income and a combined ratio of over 100 indicates an underwriting loss. The underwriting environment
varies across countries and products, as does the degree of litigation activity, all of which affect such ratios. In addition, investment returns,
local taxes, cost of capital, regulation, product type and competition can have an effect on pricing and consequently on profitability as reflected
in underwriting income and associated ratios.
 Accident year loss and combined ratios, as adjusted: both the accident year loss and combined ratios, as adjusted, exclude catastrophe
losses and related reinstatement premiums, prior year development, net of premium adjustments, and the impact of reserve discounting.
Catastrophe losses are generally weather or seismic events having a net impact in excess of $10 million each.
22
Glossary of Non-GAAP Financial Measures (continued)
Commercial Insurance: Institutional Markets; Consumer Insurance: Retirement and Life
 Pre-tax operating income is derived by excluding the following items from pre-tax income:
– changes in fair values of fixed maturity securities designated to hedge living benefit liabilities (net of interest expense);
– net realized capital gains and losses;
– changes in benefit reserves and DAC, VOBA and SIA related to net realized capital gains and losses;
– legal settlements related to legacy crisis matters described above.
 Premiums and deposits: includes direct and assumed amounts received and earned on traditional life insurance policies, group benefit
policies and life-contingent payout annuities, as well as deposits received on universal life, investment-type annuity contracts and mutual funds.
Corporate and Other
 Pre-tax operating income and loss is derived by excluding the following items from pre-tax income and loss:
– loss on extinguishment of debt
– net gain or loss on sale of divested businesses, including:
– net realized capital gains and losses
• gain on the sale of ILFC and
– changes in benefit reserves and DAC, VOBA and SIA related
• certain post-acquisition transaction expenses incurred by AerCap
in connection with its acquisition of ILFC and the difference
to net realized capital gains and losses
between expensing AerCap’s maintenance rights assets over the
– income and loss from divested businesses, including Aircraft Leasing
remaining lease term as compared to the remaining economic life
of the related aircraft and our share of AerCap’s income taxes
– Certain legal reserves (settlements) related to legacy crisis matters
described above
Results from discontinued operations are excluded from all of these measures.
Acronyms
 YTD – Year-to-date
 YoY – Year-over-year
 NPW – Net premiums written
 AUM – Assets under management
 FX – Foreign exchange
 AOCI – Accumulated other comprehensive income
 DTA – Deferred tax assets
 PYD – Prior year loss reserve development
23
Non-GAAP Reconciliation – Premiums and Deposits,
Operating Revenues, and General Operating Expenses
Institutional Markets
Premiums and Deposits
($ in Millions)
Premiums and Deposits
Deposits
Other
Premiums
2Q14
$195
(29)
(5)
$161
2Q15
$680
(26)
(11)
$643
Retirement
2Q14
$6,167
(6,132)
62
$97
2Q15
2Q14
2Q15
$6,070
(6,046)
20
$44
$1,207
(383)
(148)
$676
$1,249
(380)
(167)
$702
Total Operating Revenues
(In Millions)
Total operating revenues
Reconciling Items:
Changes in fair values of fixed maturity securities designated to living benefit
liabilities, net of interest expense
Net realized capital gains (losses)
Income from divested businesses
Legal settlements related to legacy crisis matters
Other
Total revenues
General operating expenses, Operating basis
($ in Millions)
Total general operating expenses, Operating basis
Loss adjustment expenses, reported as policyholder benefits
and losses incurred
Advisory fee expenses
Non-deferrable insurance commissions
Direct marketing and acquisition expenses, net of deferrals
Investment expenses reported as net investment income
Total general operating and other expenses included in pretax operating income
Legal reserves related to legacy crisis matters
Total general operating and other expenses, GAAP basis
1Q14
Life
2Q14
2Q14
2Q15
$15,419
$15,635
54
(87)
162
489
12
$16,136
126
(33)
76
(18)
$15,699
3Q14
4Q14
1Q15
2Q15
1H14
1H15
$2,879
$3,052
$2,993
$3,016
$2,784
$2,942
$5,931
$5,726
(407)
(418)
(408)
(434)
(423)
(428)
(825)
(851)
311
127
116
(25)
337
119
146
(28)
338
130
105
(24)
329
146
203
(11)
332
128
140
(20)
341
126
101
(19)
648
246
262
(53)
673
254
241
(39)
3,001
3,208
3,134
3,249
2,941
3,063
6,209
6,004
23
$3,024
506
$3,714
17
$3,151
$3,249
8
$2,949
27
$3,090
529
$6,738
35
$6,039
24
Non-GAAP Reconciliation –
Pre-tax and After-tax Operating Income
Pre-tax and After-tax Operating Income
(In Millions, Except Per Share Data)
Pre-tax income from continuing operations
Adjustments to arrive at Pre-tax operating income:
Changes in fair values of fixed maturity securities designated to hedge living benefit liabilities,
net of interest expense
Changes in benefit reserves and DAC, VOBA and SIA related to net realized capital gains
(losses)
Loss on extinguishment of debt
Net realized capital (gains) losses
(Income) loss from divested businesses
Legal settlements related to legacy crisis matters
Legal reserves related to legacy crisis matters
Pre-tax operating income
Net income attributable to AIG
Adjustments to arrive at After-tax operating income (amounts net of tax):
Uncertain tax positions and other tax adjustments
Deferred income tax valuation allowance releases
Changes in fair values of fixed maturity securities designated to hedge living benefit liabilities,
net of interest expense
Changes in benefit reserves and DAC, VOBA and SIA related to net realized capital gains
(losses)
Loss on extinguishment of debt
Net realized capital (gains) losses
(Income) loss from discontinued businesses
(Income) loss from divested businesses
Legal reserves (settlements) related to legacy crisis matters
After-tax operating income
After-tax operating income per diluted share
2Q14
2Q15
$4,480
$2,552
(54)
87
52
28
34
(162)
(2,151)
(12)
506
$2,693
$3,073
342
(126)
34
(76)
27
$2,868
$1,800
39
(75)
(49)
(40)
(35)
57
35
18
22
(155)
(30)
(1,399)
321
$1,796
$1.23
222
(79)
(16)
11
(31)
$1,893
$1.39
25
Non-GAAP Reconciliation –
Book Value Per Share and Return On Equity
Book Value Per Common Share
($ in Millions, Except Per Share Data)
Total AIG shareholders’ equity (a)
Less: Accumulated other comprehensive income (AOCI)
Total AIG shareholders’ equity, excluding AOCI (b)
Less: Deferred tax assets (DTA)*
Dec. 31, 2014
June 30, 2014
June 30, 2015
$106,898
$108,161
$104,258
(10,617)
(11,511)
(7,620)
96,281
96,650
96,638
(16,158)
(15,899)
(15,290)
Total AIG shareholders’ equity, excluding AOCI and DTA (c)
$80,123
$80,751
$81,348
Total common shares outstanding (d)
1,375.9
1,428.6
1,307.5
Book value per share (a÷d)
$77.69
$75.71
$79.74
Book value per share, excluding AOCI (b÷d)
$69.98
$67.65
$73.91
Book value per share, excluding AOCI and DTA (c÷d)
$58.23
$56.53
$62.22
Return On Equity (ROE) Computations ($ in Millions)
2Q14
Actual or annualized net income attributable to AIG (a)
$12,292
$7,200
$7,184
$7,572
105,997
106,119
(10,298)
(9,139)
95,699
96,980
(16,709)
(15,428)
$78,990
$81,552
11.6%
6.8%
ROE – after-tax operating income, excluding AOCI (b÷d)
7.5%
7.8%
ROE – after-tax operating income, excluding AOCI and DTA (b÷e)
9.1%
9.3%
Actual or annualized after-tax operating income (b)
Average AIG shareholders’ equity (c)
Less: Average AOCI
Average AIG shareholders’ equity, excluding average AOCI (d)
Less: Average DTA
Average AIG shareholders’ equity, excluding average AOCI and DTA (e)
ROE (a÷c)
2Q15
26
Non-GAAP Reconciliation –
Accident Year Combined Ratio, as Adjusted
Property Casualty
Mortgage Guaranty
Personal Insurance
2Q14
2Q15
2Q14
2Q15
2Q14
2Q15
67.7
70.8
(3.1)
19.5
53.5
52.7
(2.3)
(4.1)
N/M
N/M
(0.6)
(0.5)
Prior year development net of premium adjustments
0.7
(5.3)
39.4
7.5
0.5
0.6
Net reserve discount benefit (change)
0.4
5.2
N/M
N/M
N/M
N/M
66.5
66.6
36.3
27.0
53.4
52.8
Acquisition ratio
15.4
15.1
8.4
8.8
26.9
27.9
General operating expense ratio
Accident Year Combined Ratio, As Adjusted
Loss ratio
Catastrophe losses and reinstatement premiums
Accident year loss ratio, as adjusted
13.4
12.9
16.4
17.7
18.4
19.1
Expense ratio
28.8
28.0
24.8
26.5
45.3
47.0
Combined ratio
96.5
98.8
21.7
46.0
98.8
99.7
(2.3)
(4.1)
N/M
N/M
(0.6)
(0.5)
Prior year development net of premium adjustments
0.7
(5.3)
39.4
7.5
0.5
0.6
Net reserve discount benefit (charge)
0.4
5.2
N/M
N/M
N/M
N/M
95.3
94.6
61.1
53.5
98.7
99.8
Catastrophe losses and reinstatement premiums
Accident year combined ratio, as adjusted
27
Non-GAAP Reconciliation –
Normalized ROE, Ex. AOCI & DTA*
1H’15
Pre-tax
As reported
2Q15
After-tax
ROE
Pre-tax
After-tax
ROE
$5,395
$3,584
8.8%
$2,868
$1,893
9.3%
Catastrophe losses below expectations
(153)
(99)
(0.2%)
(39)
(25)
(0.1%)
Better than expected alternative returns
(320)
(208)
(0.5%)
(179)
(116)
(0.6%)
Better than expected DIB & GCM returns
(372)
(242)
(0.6%)
(312)
(203)
(1.0%)
Fair value changes on PICC investments
(278)
(181)
(0.4%)
(224)
(146)
(0.7%)
Net reserve discount charge
(235)
(153)
(0.4%)
(400)
(260)
(1.3%)
365
237
0.6%
329
214
1.1%
$4,402
$2,938
7.3%
$2,043
$1,357
6.7%
Adjustments to arrive at Normalized ROE, ex. AOCI & DTA:
Unfavorable prior year loss reserve development
Normalized ROE, ex. AOCI & DTA
* Normalizing adjustments are tax effected using a 35% tax rate and computed based on average shareholders’ equity, excluding AOCI and
DTA, for the respective period.
28
American International Group, Inc. (AIG) is a leading global insurance organization serving customers in more than 100 countries and jurisdictions. AIG companies serve commercial, institutional, and
individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in
the United States. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.
Additional information about AIG can be found at www.aig.com | YouTube: www.youtube.com/aig | Twitter: @AIGinsurance | LinkedIn: http://www.linkedin.com/company/aig.
AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit our
website at www.aig.com. All products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Products or services may not be available in all countries, and
coverage is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain property-casualty coverages may be provided by a surplus lines
insurer. Surplus lines insurers do not generally participate in state guaranty funds, and insureds are therefore not protected by such funds.